Suppose That in Horsehead, Massachusetts, the Cost of Operating a Lobster

question 8

Multiple Choice

Suppose that in Horsehead, Massachusetts, the cost of operating a lobster boat is $6,000 per month. Suppose that if x lobster boats operate in the bay, the total monthly revenue from lobster boats in the bay is $1,000(18x - x²) . If there are no restrictions on entry and new boats come into the bay until there is no profit to be made by a new entrant, then the number of boats who enter will be X₁. If the number of boats that operate in the bay is regulated to maximize total profits, the number of boats in the bay will be X₂.

• A) X₁ = 6 and X₂ = 4.
• B) X₁ = 12 and X₂ = 12.
• C) X₁ = 12 and X₂ = 6.
• D) X₁ = 16 and X₂ = 10.
• E) None of the above.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until the end of its lifetime, factoring in its current market price, face value, interest rate, and time to maturity.

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The potential for investment losses due to fluctuations in interest rates.

Zero Coupon Treasury Bond

A government bond that does not pay interest throughout its life and is sold at a discount from the face value.